Red Corporation will issue common shares with a par value of P10 for the net assets of Blue Company. Red's Common stock has a current market value of P40 per share. Blue's statement of financial position on the date of acquisition follow: Current assets P320,000 Common stock, P5 par Additional paid in capital P80,000 Property and Equipment 880,000 320,000 Liabilities 400,000 Retained Earnings 400,000 Blue's current assets are appraised at P400,000 and the property and equipment was also appraised at P1,600,000. Its liabilities are fairly value. Accordingly, Red Corporation issued shares of its common stock with a total market value equal to that of Blue's net assets including goodwill. Red also paid P60,000 acquisition costs, 80% were direct and the remainder are indirect costs.

Red Corporation will issue common shares with a par value of P10 for the net assets of Blue Company. Red's Common stock has a current market value of P40 per share. Blue's statement of financial position on the date of acquisition follow: Current assets P320,000 Common stock, P5 par Additional paid in capital P80,000 Property and Equipment 880,000 320,000 Liabilities 400,000 Retained Earnings 400,000 Blue's current assets are appraised at P400,000 and the property and equipment was also appraised at P1,600,000. Its liabilities are fairly value. Accordingly, Red Corporation issued shares of its common stock with a total market value equal to that of Blue's net assets including goodwill. Red also paid P60,000 acquisition costs, 80% were direct and the remainder are indirect costs.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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